Trading in Hub Power’s Sukuk to commence at PSX from Monday

KARACHI: The Hub Power Holdings has listed its Rs6 billion privately placed Sukuk at the Pakistan Stock Exchange (PSX), and the trading will commence from July 12, 2021 through Bond Automated Trading System (BATS) and will be settled through the National Clearing Settlement System (NCSS) on T+1 basis.

In November 2020, the Hub Power Company (Hubco), through its wholly-owned subsidiary, Hub Power Holdings Limited, issued Rs6 billion discounted Sukuk with Arif Habib Limited as its arranger and Meezan Bank Limited as Shariah adviser. The Sukuk was subscribed by the financial institutions, investment companies and other eligible institutions.

“The purpose of the 5-year tenor Sukuk is to finance the ongoing capital requirements of the company,” Hubco said in a statement.

“With an aggressive growth plan and focus on growing the shareholder value, Hubco is pursuing opportunities in the domain of thermal energy, alternative energy and water treatment.” Currently, Hubco has an installed capacity of producing more than 2,920 megawatt through its four plants in Hub, Narowal and Kashmir.

The Sukuk were issued at discount, covering profit payments for the first two years of the issue. The profit rate for the first two years will be subject to an adjustment on a semiannual basis and the differential profit will be settled at the end of the discounting period. Thereafter, the profit will be payable semi-annually in arrears with a spread of 250bps over six months Kibor (Karachi Interbank Offered Rates).

The debt security refers to a debt instrument, such as a government or corporate bond that can be bought or sold between the two parties. Publicly-placed debt instruments listed on the PSX can be offered to the general public, as well as institutional investors. Privately-placed debt instruments listed on the PSX can only be offered to and transferred in the name of qualified institutional buyers.

Last year in November, the Pakistan Stock Exchange launched a trading platform for debt securities like treasury bills, Pakistan Investment Bonds (PIBs) and Sukuk. The debt-based financing through competitive bidding at the stock market allows the fund raiser to acquire funds at cheaper rates than those at which banks usually offer negotiated loans.

The development of debt market will create an enabling environment for the entire economic system. Analysts believe the development of the secondary debt market at the PSX will prove worthwhile for the economy and increase chances of growth in the economic activities.

“Growth of the debt market is a strategic objective of the PSX and critical for the economic growth of Pakistan,” PSX CEO Farrukh Khan has time and again said.

Businesses are seen approaching Islamic financial system that has sufficient liquidity. The Sukuk market is consistently gaining ground in the country. The Hubco’s decision followed a Sukuk funding to K-Electric. In August 2020, K-Electric launched a Sukuk of up to Rs25 billion for a period of seven years.

Analysts said the Sukuks can help diversify the investment portfolio and can be used as an effective instrument for risk reduction.

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